Barbados reports robust half-year growth

The Barbados economy grew at a robust pace of 4.5 per cent for the first half of 2024, backed by an increase in total production and record employment levels, the Central Bank of Barbados, CBB, reported on Monday.

CBB Governor Dr Kevin Greenidge, in his six-month economic review, attributed the economic expansion primarily to “strong” growth in tourism, describing it as “one of the strongest we have ever had” outside the pandemic period.

“This was the largest first-half tourism performance that we have on record. The sector grew by 18 per cent. All markets performed strongly,” Greenidge said.

There were significant increases across various tourist markets, led by the United States, with a 45 per cent jump, from 82,000 to 120,000 tourists.

As for other sectors, ]construction, grew by 7.1 per cent, benefiting from increased hotel activity and public sector projects; and agriculture recorded a 5.4 per cent growth, driven by chicken and fish production.

The labour market also benefited from the economic upturn, with the unemployment rate falling to 6.9 per cent in March, two points better than the 8.9 per cent rate in March 2023. Greenidge noted this as “the lowest first-quarter unemployment rate” in recent history, only surpassed by the 2007 performance.

Inflation has moderated, with the 12-month average rate at 2.7 per cent, down from 4.2 per cent the previous year. This was attributed to easing international commodity prices, including global energy and food prices.

The country’s foreign reserves rose by $245.4 million year to date, reaching $3.2 billion, representing 32.2 weeks of import cover. Greenidge credited this boost to tourism receipts, which amounted to a net addition of $447 million.

On the fiscal front, the government recorded a primary surplus of $509 million and an overall surplus of just over $300 million, or 3.5 per cent of GDP. The debt-to-GDP ratio declined to 105 per cent, reflecting both economic growth and a reduction in the debt stock.

Looking ahead, Greenidge is projecting four per cent growth for the full year, citing strong hotel forward bookings, increased airlift capacity, and robust cruise ship performance. However, he cautioned about potential risks, including a possible pickup in energy prices and geopolitical conflicts.

“All in all, the outlook remains pretty balanced both with upside and downside risks,” the central bank governor said.

However, the central bank’s optimistic outlook for the economy comes with several caveats and areas of ongoing focus.

Greenidge expects inflation to settle between 3.0 per cent and 3.5 per cent by year-end, but warned of potential risks. These include a possible increase in energy prices due to OPEC’s recent move to constrain supply, ongoing geopolitical conflicts, shipping congestion in the Panama Canal, and the ever-present threat of natural disasters in the Caribbean region.

Despite these challenges, the debt-to-GDP ratio is projected to reach approximately 100 per cent by the end of the year, aligning with the government’s wider target of 60 per cent by 2035.

“The fiscal position in terms of the primary balances is consistent with the trajectory as we target 60 per cent by 2035,” Greenidge said.

The central bank governor also highlighted the positive performance of the commercial banking system, with non-performing loans decreasing to 4.3 per cent, one of the lowest rates on record. Financial institutions remain “quite healthy”, with capital adequacy ratios well above requirements, he said.

The governor’s overall presentation painted a picture of an economy that has made significant strides in its recovery and growth, but one that also faces ongoing challenges and potential risks. He said that the government’s continued focus on fiscal discipline, coupled with efforts to boost key sectors and manage debt, appears to be yielding positive results.

As for the performance of the manufacturing sector, Greenidge said output in the sector was up in general, and that the broad-based growth suggests a strengthening of the country’s productive capacity beyond services and tourism.

CMC